Is it cheaper to lease or buy a car?

Buying is almost always cheaper over 5+ years because you build equity. Leasing can be cheaper short-term if you want a new car every 3 years and stay within mileage limits. The key is comparing total costs, not monthly payments.

What is a good money factor for a car lease?

A money factor below 0.0015 (3.6% APR equivalent) is generally good. Multiply any money factor by 2,400 to convert it to an APR. Check manufacturer published rates on Edmunds or Leasehackr before accepting a dealer's offer.

Should I put money down on a lease?

Generally no. A large down payment (called a cap cost reduction) reduces your monthly payment but not your total lease cost, and you lose it if the vehicle is totaled in the first month.

What happens at the end of a car lease?

At lease end you return the car, pay a disposition fee (typically $300–$400), and any excess mileage or wear charges. You can also buy the car at the predetermined residual value or lease/buy a new vehicle.

How does depreciation affect the buy vs lease decision?

High-depreciation cars make better leases since you pay for the depreciation either way, but at least you're not stuck owning a car that's dropped 40% in value. Slow-depreciating vehicles favor buying because residual equity is higher.

⚖️Comparisons

Should You Lease or Buy a Car?

Should you lease or buy your next car?

What This Does

Choosing between leasing and buying a car isn't about the monthly payment — it's about the total cost over your ownership period. The dealership knows this. You should too. When you lease a car, you're financing the depreciation during your lease term plus a finance charge (expressed as a money factor). Your monthly payment is lower, but you build zero equity and face fees at lease end. When you buy, your monthly payment is higher but you own an asset that retains value. The key question is: how long do you plan to keep the vehicle? If you keep it 7–10 years, buying almost always wins. If you want a new car every 3 years, leasing can be competitive — but you need to negotiate the cap cost and money factor, not just the monthly payment. This calculator uses the standard money factor formula to calculate your exact monthly lease payment, compares it against your loan cost, and projects true net costs over your planned ownership period — accounting for taxes, fees, depreciation, and residual equity. Enter your numbers to see which option is right for your situation.

Assumptions

·Lease payment calculated using standard money factor formula: (Net Cap Cost − Residual) ÷ Term + (Net Cap Cost + Residual) × Money Factor
·Sales tax applied to monthly payment (not sale price) as done in most US states
·Car depreciation modeled as a percentage reduction per year for buy scenario
·Buy comparison accounts for residual equity (car value at end of ownership period)
·Mileage overage fees not included — add actual overage estimates to lease costs if applicable

When Should You Use This?

→You're deciding between a lease offer and a financing offer at the dealership
→You want to know the true total cost of leasing vs buying over 3–7 years
→You're comparing a money factor to an equivalent APR
→You want to know how much equity you'd have if you bought instead
→You're evaluating whether it's better to lease multiple times or own long-term

Example Scenario

Marcus is considering a $38,000 SUV. The dealer offers a 36-month lease with a 0.00135 money factor, 58% residual, and $1,500 cap cost reduction — or a 60-month loan at 6.8% APR with $5,000 down. Using this calculator, Marcus discovers the lease costs $23,400 total over 3 years with zero equity, while the loan costs $34,200 but leaves him with a $16,000 car. Over 5 years he'd need two leases ($47,000 total) versus one loan with $10,000 equity remaining. Buying wins by $21,000 over 5 years — and Marcus negotiates accordingly.

🚗 Lease vs Buy Car Calculator

Total Cost Comparison · Year-by-Year Timeline · What-If Scenarios · Equity Analysis

Results update in real time. Uses the money-factor lease formula and compares net costs after equity.

Vehicle Details (Shared)

Vehicle Price

Sales Tax %

Annual Depreciation %

Planned Ownership (yrs)

🔑 Lease Terms

Residual Value %

Lease Term (months)

Cap Cost Reduction

Money Factor

×2400 = 3.00% APR equiv.

Disposition Fee

🏷️ Purchase Terms

Down Payment

Loan APR %

Loan Term

About This Calculator

This lease vs buy car calculator uses the money-factor formula for lease payments and standard amortization for buy payments. Lease: depreciation = (netCapCost − residual) ÷ term; financeCharge = (netCapCost + residual) × moneyFactor; monthly = depreciation + financeCharge + tax. Buy: standard amortization on (price − down + tax) at APR/12. Comparison: lease total × leasesNeeded vs buyTotal − carResidualValue (equity-adjusted). Score: winner="buy" → clamp(50 + diff/price × 100), winner="lease" → clamp(50 − diff/price × 100). Tiers: Strongly Buy (70+), Lean Buy (58+), Too Close (42+), Lean Lease (30+), Strongly Lease. All 12 inputs update in real time.

The Breakdown tab renders a BarChart of 3 cost totals (lease total/blue, buy gross/indigo, buy net/green — net bar at full opacity as the apples-to-apples comparison) with LabelList dollar labels, then side-by-side lease/buy detail tables. The Timeline tab renders a dual LineChart of cumulative lease cost (solid blue) vs cumulative buy net cost (dashed green) year by year with Legend, then a year-by-year table with winner badges. The Scenarios tab renders a grouped BarChart with lease/buy bars side-by-side for 5 scenarios (current/+$3k down/APR−1%/own 7yr/own 3yr) plus a scenario table with difference column. The Insights tab shows 4 key insights (full comparison summary, monthly payment context, equity analysis, finance rate context) and 4 conditional action plan items.

Results are estimates only and do not constitute financial, tax, or legal advice. Always consult a qualified professional before making financial decisions.

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Common Mistakes to Avoid

✕Comparing only monthly payments — always compare total cost over the same period
✕Putting a large cap cost reduction down on a lease — it's at risk and doesn't reduce total cost
✕Ignoring the disposition fee at lease return — typically $300–$400
✕Not accounting for mileage overages — at $0.15–$0.25/mile these add up fast
✕Accepting the dealer's money factor without comparing to published manufacturer rates

Frequently Asked Questions